Richard Edgley

This is the second in mine and my colleague Sheel Patel's series of pieces for Fluxx on trends in the luxury market.

As we discussed in our previous blog, the luxury market is at an interesting stage. There are new emerging markets to explore, which bring fresh challenges to many companies. In addition there are challenges closer to home which are forcing brands to reconsider their current business models and how they engage with their customers.

In this, our second perspective we are introducing how we think brands can blend the right ingredients to ensure long-term success. We will be exploring our thinking in more detail at our Fluxx Luxx event on the 22^nd November.

After years of wowing the public, now its fashion houses who are striving to get the looks – falling over themselves to stream their spot at London Fashion Week to as many people as possible.

A couple of years ago there would have been only 200 people watching the runway – today’s audience is global. The British Fashion Council reported that at this season’s London Fashion Week 2013, 70% of the shows were streamed live. There is always rivalry between the fashion houses, from who is sitting on your front row to the theatre of the show. With live streaming, the race to better each other in innovation will only intensify. What will innovations in Autumn/Winter season 2013 have in store?

There have been some unique and interesting moves forward in digital for Spring/Summer 2013, pushing the boundaries of customer experience and commercialisation. Burberry’s show fitted perfectly with their strategy to merge the physical and digital experience, as evidenced by the seamlessness of their flagship World Store and runway show. This builds upon last year’s ‘Retail Theatre’ approach that saw the brand introduce click and buy direct from the runway, enabling  customers to receive items in 6 to 8 weeks rather than waiting 3 months for stock to come into stores. This not only enhances the experience for customers it makes sound business sense enabling effective supply chain management and forecasting.

When watching a live-streamed show, many can ‘like’ a Burberry outfit, few can click the buy button. Topshop have successfully married the immersive show experience with making a purchase. As a result of this innovation the ability to share your favourite looks by ‘customising the catwalk’ has resulted in a printed panel dress being sold out within one hour of the show and Topshop lipsticks being purchased every minute.

Brands are now better placed to use digital effectively to tell their story, and are no longer afraid to leverage social shopping. These bold approaches for the luxury sector are crucial to ensure brands remain financially viable in these challenging times.

What does Fluxx think?

Despite some disappointing results and cautious outlooks, the value of British heritage brands remains solid. All have identified international growth as being core to their strategy. However, we believe to achieve these ambitious plans, require an understanding of three core related themes, which are significant in seeking to engage with consumers in the digital and physical space.

We have identified these themes as:

Storytelling

A consumer’s thirst for knowledge now goes beyond product and price. There is an expectation from that the brand will engage them with its heritage, provenance and experience. This holds true whether it be experiencing the theatre of a live runway show, seeing the craftsmanship of a product, or engaging new consumers to a brand they may never have heard of.

This activity is often thought to be in the PR or brand management domain. Whilst this is true, we believe it’s more about engaging people in a deeper relationship with the brand. Storytelling can achieve this simply and memorably.

Omni-channel experience

Omni-channel seems like en vogue buzzword for multichannel retail. But it is more than that. Omni-channel is the bringing together of all brand and customer touch points, to work as one simultaneous experience. Whether that means watching a live runway show on your iPad and clicking to purchase, down to the merging of physical and digital spaces as recently demonstrated by Burberry and Topshop.

Commercialisation

In today’s tough economic climate, luxury brands can no longer rely on a core customer set. Over the past ten years, many brands have sought to expand their customer base through product diversification with mixed results. It is a fine line to balance brand exclusiveness whilst ensuring commercial survival. Many forward thinking brands are embracing this dichotomy, by giving customers the same experience across different levels of range and price. This means recognising that sales are not just about a store and a website. It is about embracing a suite of digital tools and then applying them appropriately. More significantly it is about not being afraid of the ‘buy now’ button.

So come and join us. Book your front row seat for Fluxx Luxx on the 22nd November.

This is a piece myself and my colleague Sheel Patel have written about developments in the luxury market. It is the first in a suite of pieces that will look at different aspects of the industry in advance of an event we are hosting at Fluxx - Flux[x] Lux[x].

Over the past few months, we at Fluxx have been observing developments in the luxury sector. There has been much discussion recently about the luxury sector bucking the recessionary trend and being one of the few industries to be growing in this age of Western austerity. While the high street suffers, luxury brands are being championed as a possible savior of the UK economy, not just bricks and mortar sales, but online too.

The BBC recently reported that Britain’s reputation for producing crafted luxury goods and services should be leveraged. Many experts perceive the rise of the aspirational emerging affluent in China and India as a growth opportunity for British luxury brands. It is hoped that with this new demand for luxury goods, the UK economy might be able to export its way out of recession.

There has been evidence of this in the luxury car manufacturing industry. Land Rover has recently partnered with Victoria Beckham to launch a special edition Range Rover, the Evoque. In response to the growing global demand for the model, Land Rover’s Halewood manufacturing plant is operating round the clock for the first time in its history, creating 1,000 jobs for the local economy in the process.

The global market for luxury spirits also promises to benefit the UK economy. Diageo recently announced plans to invest £1billion over the next five years in Scottish whisky production to meet anticipated global demand. This investment will involve infrastructure improvements such as a new distillery and storage facility, through to benefiting small craft workers making barrels.

The potential for global growth in the luxury market is not just limited to the established brands. Many British niche companies are either benefiting now, or have plans to do so. Sipsmith, the London-based micro distiller, is seeking to develop and capitalise on the niche market for super-premium gin in China. They see the potential for gin to follow whisky, and are engaging affluent Chinese consumers.

At London Fashion Week, the talk was not just been about next season’s fashion trends, or the new hi-tech Burberry flagship store. The Financial Times reported that the next big British brand is the luxury leather goods retailer Smythson. They have ambitious international growth plans, including expanding their retail presence from a dozen to between 40 and 50 shops in the next four or five years, eventually reaching 100.

This will not be an easy journey. British poster child Burberry have had mixed fortunes recently. The opening of their flagship London store, designed to blend the physical and digital retail experience, was accompanied by a profit warning which wiped a fifth off the value of its shares. Mulberry had a disappointing 2011, resulting in a drop of 22% on their share price with a cautious outlook for 2012. Likewise, Aquascutum has seen tough times. Earlier this year they were bought out of administration for £15m, which some might argue is a bargain for an upscale heritage brand. But it is the value of their historic roots that is their saving grace. UK chief executive Tim Dally told Retail Week that he wanted to exploit the brand’s “quintessentially British heritage” by opening a flagship store in the West End. He sees their target audience not only coming from China, but also Russia, Middle East and North America.

So it seems that the UK luxury market is not as resilient as first thought. On the one hand there is LVMH, who reported revenue of £13billion in the first half of 2012 (an increase of 26%), and on the other you have a number of luxury heritage brands reporting flat results.

 There is no doubt that China still offers much to UK luxury brands. However, countries such as France and Italy have also a strong tradition for crafted luxury goods that appeal to global consumers be they from emerging/existing markets. For UK luxury brands to meet their ambitious plans they need to focus as much on evolving their commercial model as much as their product lines.

 The luxury market is at interesting stage. There are new emerging markets to explore, which bring fresh challenges to many luxury brands. In addition there are challenges closer to home which are forcing brands to reconsider their current business models and how they engage with their customers.

Fluxx will be exploring these themes through a series of blogs leading to our Flux[x] Lux[x] event on 22^nd November 2012. Watch this space for further details.